SBA 504 - 50/40/10

This weeks message will deal with how commercial Real Estate can be financed through the SBA Programs.  The SBA has a loan program called the 504 program, which is specifically used for the financing of Real Estate oriented transactions, which can be a part of a business opportunity or not.

The benefit to financing a Real Estate Oriented transaction through the SBA is that a business as a start up can buy real estate as part of the initial operation of the business, or an ongoing business can be sold with the real estate as well. The SBA has a very aggressive program when Real Estate is involved.

An SBA loan can be up to $4.0 million for Owner Occupied Commercial Real Estate Transactions.

Borrower Benefits

Low down payment of only 10%
Long Repayment Terms - reducing monthly paymentsCan be long term fixed rate unlike traditional 7A loans

Use of Proceeds

Purchase, construction or renovation of owner-occupied commercial real estate

Standard Loan Structure

50% First Mortgage up to 3 million, 25 years fully amortized40% SBA 504 second mortgage, 20  years fully amortized
10% down payment by borrower.

The above is commonly known as a 50/40/10.

As you can see there is as great deal of flexibility when structuring SBA Loans, this is just another benefit that SBA financing offers the business owner.